The U.S. Securities and Exchange Commission action came on the same day as a complaint filed by the Ontario Securities Commission. Regulators from both countries have been probing the Canadian company's accounting for years.

Since 2005, Nortel has been attempting to recover from an accounting crisis that affected results and caused shareholder lawsuits, regulatory investigations and the firing of key financial executives, including CEO Dunn, who was also a former CFO.

"The fraudulent conduct at issue here was egregious and long-running. Each of the defendants betrayed Nortel's investors and their misconduct gave rise to billions of dollars in shareholder losses," Linda Thomsen, director of the SEC's Division of Enforcement, said in a news release.

Also named were former Chief Financial Officer Douglas Beatty, Controller Michael Gollogly and Assistant Controller MaryAnne Pahapill. The company fired the four in April 2004, alleging misconduct and negligence.

The SEC said the four -- while serving as executives from September 2000 to January 2004 -- were involved in repeatedly altering Nortel's revenue recognition to bridge gaps between the company's true performance, its internal targets and market expectations.

The U.S. SEC is seeking a permanent injunction, civil monetary penalties, officer and director bars and repayment, plus interest.

Dunn issued a statement saying he welcomed the OSC hearing and chance to clear his name.

"I am confident that it will also lift the cloud that has been over the commitment, dedication and, above all, the integrity of Nortel employees for the past three years," he said.

Beatty's attorney said he would have no comment and Gollogly's lawyer did not return calls to his office. Pahapill's office said she was out of town and unavailable for comment.

"The action we take today sends a strong message that officers of U.S.-filing foreign corporations will be held to the same standards of accountability that are required of all participants in the U.S. financial markets," Thomsen said.

On March 1, Toronto-based Nortel added another chapter to its problematic accounting history by saying it will restate financial results for 2004 to 2006 to correct "certain errors" and delay a filing with the SEC until mid-March.

The changes add about $129 million in losses to 2004-2005 reports, while improving 2006 earnings by $15 million.

Christopher Conte, an associate director of the Commission's Division of Enforcement, said the defendants disregarded accounting principles and disclosure requirements designed to provide investors with an accurate picture of a company's performance.

"Investors were misled for extended periods of time about the health and stability of Nortel's operations," Conte said. "Further, these defendants all received significant compensation, in some cases in the millions of dollars, while they were manipulating Nortel's financial results."

Conte said that in some cases, the defendants received such compensation only because they manipulated Nortel's financial results."

According to the complaint, from late 2000 through January 2001, Dunn, Beatty and Pahapill altered Nortel's revenue recognition policies to accelerate revenue as needed to meet forecasts. It claims that from July 2002 through June 2003, Dunn, Beatty and Gollogly improperly established and released reserves to meet earnings targets and fabricated profits and pay performance-related bonuses.

Nortel issued a statement saying it had no comment and would continue to cooperate with the investigation.

Dunn said he was disappointed the U.S. SEC chose to file its complaint on the same day the Ontario Securities Commission issued a notice to the former executives to appear before the commission May 1 on allegations of misconduct and negligence. Pahapill was not named in the OSE complaint.

"I think it would have been appropriate under the circumstances if the authorities in the United States had deferred to the Ontario Securities Commission in what is really a Canadian matter and had acknowledged that the Canadian authorities are fully capable of addressing these important issues," Dunn said in the statement. "I hope that the issues can now be fully and fairly explored in a hearing in Canada."

Both commissions acknowledged the assistance of the other in their separate investigations.